Salesforce.com's new gamble

Looking to expand beyond its hosted CRM roots, Salesforce.com has embarked on a new strategy: letting customers build their own systems.

The company, seen as a leader in the movement toward so-called software as a service applications, is making a bet on a new development system--called Multiforce--that lets partners and customers custom-tailor the software and build their own services.

Though betting on a custom development strategy may seem at odds for a company whose slogan is "No Software," analysts said the plan--at least what they've heard of it so far--makes sense. Its big goal is straightforward: Give more companies reason to sign up for Salesforce.com's services, and keep existing customers happy so that licensing money keeps rolling in.

"At some point demand will level off and they'll need to have the next thing, and this is it," said David Bradshaw, analyst with U.K.-based Ovum Research. "It's a way to grow their footprint, as there will come a point where they slow down in adding new customers and as there's increased competition. It's pretty good forward thinking."

Salesforce.com's chief executive, Marc Benioff, introduced Multiforce last month. This fall at the company's annual user meeting, Salesforce is expected to disclose other details of the plan, including pricing and the names of hosted-software partners, executives said.

Right now, Salesforce continues to grow revenue and sign new customers. In mid-May, Salesforce reported first quarter 2006 net income of $4.4 million, or 4 cents per share, compared with income of $437,000, or zero cents per share, for the same period in its fiscal 2005. The company increased its overall revenue to $64.2 million, compared with $34.8 million for the same period last year.

Salesforce said in its earnings report that it now counts roughly 267,000 subscribers, of which it added 40,000 during the first quarter.

Like other analysts, Bradshaw believes Benioff's gambit could prove a savvy move if companies can quickly build additional tools that add value to Salesforce's products.

Multiforce is also aimed at giving independent software vendors an opportunity to create products that expand the capabilities of Salesforce's existing tools. Using the development platform, customers and ISVs are promised the ability to create new systems

The model Salesforce.com is persuing failed years ago with the ASP-Agregators for two reasons: 1) it was technologically to complex to host all kind of different applications (and imagine giving support!) and 2) it was impossible to focus marketing and sales... Time will tell. They might have solved (1) but (2) will be interesting. What if something OPen Source comes along?<a class="jive-link-external" href="http://www.humano2.org" target="_newWindow">http://www.humano2.org</a>

ASP failed in the late 1990s simply because the platform was not there yet, and VCs did not understand the game well so many great ideas were actually underfunded or not funded at all while hyped ideas got tons of money.

Also ASP was, and to a lesser degree now; never supported by the big enterprise players because it can disturb their business models and revenues.

Marketing and Sales? How would open source solve that?

Open Source, while is a great idea; will not dominate. The majority of businesses in US are small size companies, that dont have the IT know-how to implement opensource in house.

Software-as-a-Service (SaaS) is the ultimate software delivery model for the SMBs, for the next 10 years...

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